1. Field of the Invention
The invention relates to measuring financial performance in general and more particularly to a method and apparatus for measuring the financial performance of an entity for a given demand.
2. Background
The hospitality industry is extremely competitive. In order to succeed in the hospitality industry, proper management of available resources is important. Available resources in the hospitality industry include rooms in which guests sleep and function space (e.g., ballrooms, meeting rooms, etc.) used by guests for other purposes. It is common in the hospitality industry to classify consumers of these resources as belonging to one of two types: transient and group. Transient consumers are those consumers who need a single room or a small number of rooms in which to sleep for a period of time, but who do not utilize function space. Group consumers are those consumers who need a large number of rooms. Group consumers also typically, but not necessarily, require function space.
Where the demand for resources is less than the supply (i.e., occupancy is low), resource management is simple—all demands (i.e., requests for rooms and/or function space) are accepted (i.e., rooms and function space are sold to all customers who ask for it). The more difficult management problem occurs when demand, or expected demand, exceeds supply. In this situation, effectively managing resources requires decisions as to which demands (requests) for rooms and function space to accept and which to refuse.
Further complicating the management issue is the existence of different rates for the same room. A hospitality establishment such as a hotel often has an established “rack rate” at which it will rent a given room to a single person with little or no advance registration. The same room will often be rented to a person who is part of a group at a different, lower rate, and may be rented at yet another promotional rate at different times.
Additionally, hospitality establishments often enter into arrangements with resellers such as tour operators under which the reseller agrees to fill a large volume of rooms from the hospitality establishment in return for a discounted rate. Under such agreements, the hospitality establishment often must provide a room to such resellers whenever the room is requested, even if the hospitality establishment believes there will be a demand for the room (i.e., an opportunity to rent the room) from higher paying customers (this is sometimes referred to as last room availability).
As a practical matter, it is necessary to make management decisions as to whether to dedicate a resource (i.e., confirm a reservation) when the demand is made. This means, for example, that a hotel with 15 available rooms for an upcoming weekend must make a decision on a group demand for 10 rooms not knowing whether other demands (which may be transient or group demands) for some or all of those rooms will occur after the group demand is received.
Some attempts at implementing rules and procedures for responding to (i.e., deciding whether to accept or reject) these demands have been made. These rules and procedures are commonly referred to as “revenue management controls,” “revenue optimization techniques,” or “yield management.” The effectiveness of these revenue management controls can be measured in a number of ways. One possible way of measuring the effectiveness is by comparing the actual occupancy rate with the theoretical maximum occupancy rate for a given demand. However, this measurement technique ignores the aforementioned difference in room rates. A more effective measurement technique is to measure effectiveness by comparing an amount of revenue or profit actually realized as a function of total revenue or profit that could have been realized for a given demand amount had the optimal decisions on whether to accept or deny a demand been made.
Typical management effectiveness measurement techniques in the hospitality industry are concerned only with the transient portion of the management problem. For example, some existing techniques completely ignore revenue and profit from function space and simply subtract rooms rented to group guests from the “inventory” of available rooms for which management effectiveness is measured.
What is needed is a method and apparatus that measures the management effectiveness for both function and room space for both group and transient customers.